Market capitalization

Market capitalization (market cap) is the market value of a publicly traded company's outstanding shares.

Market capitalization is equal to the share price multiplied by the number of shares outstanding.[2][3] As outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation.

Market cap reflects only the equity value of a company. It is important to note that a firm's choice of capital structure has a significant impact on how the total value of a company is allocated between equity and debt. A more comprehensive measure is enterprise value (EV), which gives effect to outstanding debt, preferred stock, and other factors. For insurance firms, a value called the embedded value (EV) has been used.

Market capitalization is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures. It is also used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. In performing such rankings, the market capitalizations are calculated at some significant date, such as June 30 or December 31.

The total capitalization of stock markets or economic regions may be compared with other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007[4] and rose as high as US$57.5 trillion in May 2008[5] before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in September 2008.[5] In 2014 and 2015, global market capitalization was US$68 trillion and US$67 trillion, respectively.[6]

Photos NewYork1 032
The New York Stock Exchange on Wall Street, the world's largest stock exchange in terms of total market capitalization of its listed companies[1]

Calculation

Market cap is given by the formula , where MC is the market capitalization, N is the number of shares outstanding, and P is the closing price per share.

For example, if a company has 4 million shares outstanding and the closing price per share is $20, its market capitalization is then $80 million. If the closing price per share rises to $21, the market cap becomes $84 million. If it drops to $19 per share, the market cap falls to $76 million. This is in contrast to mercantile pricing where purchase price, average price and sale price may differ due to transaction costs.

Not all of the outstanding shares trade on the open market. The number of shares trading on the open market is called the float. It is equal to or less than N because N includes shares that are restricted from trading. The free-float market cap uses just the floating number of shares in the calculation, generally resulting in a smaller number.

Market cap terms

Traditionally, companies were divided into large-cap, mid-cap, and small-cap.[2] The terms mega-cap and micro-cap have also since come into common use,[7][8] and nano-cap is sometimes heard. Different numbers are used by different indexes;[9] there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted over decades due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950, but it is not very large now), and market caps are likely to be different country to country.

See also

References

  1. ^ "Market highlights for first half-year 2010" (PDF). World Federation of Exchanges. Archived from the original (PDF) on July 22, 2013. Retrieved May 29, 2013.
  2. ^ a b "Market Capitalization Definition". Retrieved April 2, 2013.
  3. ^ "Financial Times Lexicon". Retrieved February 19, 2013.
  4. ^ Global stock values top $50 trln: industry data (Reuters)
  5. ^ a b WFE Report Generator including report for Domestic Market Capitalization 2008 Archived October 8, 2008, at the Wayback Machine (World Federation of Exchanges)
  6. ^ WFE Full Year Statistics 2015 (World Federation of Exchanges)
  7. ^ "Mega Cap Definition". Retrieved April 2, 2013.
  8. ^ "Micro Cap Definition". Retrieved April 2, 2013.
  9. ^ Definition of Market Capitalization

External links

List of largest banks

These are lists of the banks in the world, as measured by total assets.

List of largest banks in the United States

The following table lists the 100 largest bank holding companies in the United States ranked by assets of September 30, 2018; their market capitalization is also shown.

List of public corporations by market capitalization

The following is a list of publicly traded companies having the greatest market capitalization. This list is primarily based on the Financial Times Global 500

Market capitalization is calculated from the share price (as recorded on selected day) multiplied by the number of outstanding shares. Figures are converted into USD millions (using rate from selected day) to allow for comparison. Only companies with free float at least 15% are included, value of unlisted stock classes is excluded. Investment companies are not included in the list.

List of stock exchanges

This is a list of major stock exchanges. Those futures exchanges that also offer trading in securities besides trading in futures contracts are listed both here and at the list of futures exchanges.

There are sixteen stock exchanges in the world that have a market capitalization of over US$1 trillion each. They are sometimes referred to as the "$1 Trillion Club". These exchanges accounted for 87% of global market capitalization in 2015. Some exchanges do include companies from outside the country where the exchange is located.

Public float

Public float or free float represents the portion of shares of a corporation that are in the hands of public investors as opposed to locked-in stock held by promoters, company officers, controlling-interest investors, or governments. This number is sometimes seen as a better way of calculating market capitalization because it provides a more accurate reflection (than entire market capitalization) of what public investors consider the company to be worth.In this context, the float may refer to all the shares outstanding that can be publicly traded.

Russell 2000 Index

The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. It was started by the Frank Russell Company in 1984. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.

The Russell 2000 is by far the most common benchmark for mutual funds that identify themselves as "small-cap",

while the S&P 500 index is used primarily for large capitalization stocks. It is the most widely quoted measure of the overall performance of the small-cap to mid-cap company shares. The index represents approximately 8% of the total market capitalization of the Russell 3000 Index. As of 28 February 2019, the weighted average market capitalization for a company in the index is around $2.43 billion; the median market cap is $818 million. The market cap of the largest company in the index is $8.65 billion. It first traded above the 1,000 level on May 20, 2013.

Similar small-cap indices include the S&P 600 from Standard & Poor's,

which is less commonly used, along with those from other financial information providers.

S

S (named ess , plural esses) is the 19th letter in the Modern English alphabet and the ISO basic Latin alphabet.

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